Investors Expect Record Year for Biotech Venture Capital

Published: Nov 25, 2014

Investors Expect Record Year for Biotech Venture Capital

November 24, 2014
By Renee Morad, Breaking News Staff

Biotech venture capital is poised to hit a record year in 2014, according to a recent MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data provided by Thomson Reuters.

The biotechnology industry raised $1.05 billion in 110 deals during the third quarter of 2014, an increase of 7 percent in dollars but a decline of 13 percent in deal volume with the same quarter last year. These deals followed record high investments of $1.8 billion in biotech in the second quarter of 2014, which was the biggest three-month figure since 2005.

U.S. venture capital funding for the life sciences sector in general, which included biotechnology and medical devices, reached $1.6 billion in 188 life sciences deals during the third quarter of 2014, compared to $1.5 billion in 192 deals during the same period of 2013.

“For biotech, in particular, the numbers are just outstanding if you compare them to the previous year,” said Greg Vlahos, life sciences partner at PwC. “2013, as a whole, reached $4.7 billion, and this year we’re at almost $4 billion already. I think a lot of that is predicated on what we’ve seen in the IPO market.”

“In the second quarter, a couple of $100 million plus mega deals tipped the scales, including Intarcia’s $200 million round,” said Vlahos.

Intarcia Therapeutics raised $200 million in April 2014, along with $200 million in November 2012. RA Capital led the round as a new investor and was joined by investors such as Farallon Capital Management, Foresite Capital, Franklin Templeton, LLC and Fred Alger Management.

Intarcia Therapeutics has created a remarkably promising diabetes product with the potential to simplify glucose control and be a cost-effective solution with ensured compliance built-in, which would be inconceivable by any other means,” said Peter Kolchinsky, managing director of RA Capital and one of the key new investors in Intarcia. “We expect this product to be welcomed by patients, physicians, and importantly payors who desperately need new ways to overcome the huge financial burden associated with diabetes.”

Vlahos said investors have shown a lot of excitement around biotech companies recently, with significant interest in later-stage companies with an ability to bring products to market faster.

“Investors are looking for later stage companies that are innovative and can reduce the time to market, which reduces risk,” Vlahos said.

Biotech accounts for the majority of new IPOs, according to the report. Eighteen out of 23 IPOs in the third quarter were for life sciences, of which 13 were for biotech alone.

“The current year is much stronger than what we’ve seen in recent history,” Vlahos said. “We’ve seen more mega deals or large deals over $100 million in the last couple quarters. Part of that phenomenon is due to the fact that we’re seeing some nontraditional venture investors, such as hedge funds, getting into deals where in the past it was predominately all venture funds.”

In the third quarter of 2014, biotech landed in third place in terms of dollars raised, following behind software and media and entertainment, which brought in $3.7 billion in 418 deals and $1.8 billion in 118 deals, respectively.
  Related Jobs  
  CRA - Novo Nordisk   Pharma Field Sales - Novo Nordisk   Automation Engineer - Novo Nordisk
  Scientist - Baxter   Quality Associate - Baxter   Manufacturing Manager - Baxter
  View More Jobs

Back to news